S.B.SINHA, J. - (1.) . Whether jurisdiction of an arbitrator to interpret a contract can be subject-matter of an objection under section 30 of the ARBITRATION AND CONCILIATION ACT, 1940 (hereinafter referred to as 'the Act', for the sake of brevity) is in question in this appeal which arises out of the judgment and order dated 24.2.2000 of the High Court of judicature at Bombay in appeal no.612 of 1996 arising out of a judgment and order of a learned single judge dated 13.10.1995 dismissing the said objection of the respondent. BACKGROUND FACT:
(2.) . The parties hereto entered into a contract for supply of Helium Diving Gas pursuant to a notice inviting global tender dated 2.5.1989. In terms of the said notice inviting tender, the respondent herein was to take supply of Helium gas, which is one of the rare gases being not chemically produced and is mainly extracted from the natural gas wells in mineral form. The said gas is ordinarily imported from U.S.A., Algeria, Poland and Russia. In terms of the said notice inviting tender, three different categories of rates were to be quoted by the tenderers both foreign and Indian. Whereas the foreign tenderers were to quote their prices in foreign currency, the Indian bidders could indicate the nature of payment, i.e. if a part thereof was recoverable having foreign exchange component. Pursuant to or in furtherance of the said notice inviting tenders, the tenderers submitted their technical bids. The bidding was to be in two stages; in terms whereof the technical bids were to be opened first whereafter only final bids were to be considered. The appellant's bid was found to be the lowest in that the appellant had bid a price of Rs.150/- per cubic meter out of which US$ 5 was to be the foreign exchange component. The said bid of the appellant having been found to be the lowest, the parties entered into a negotiation; pursuant to or in furtherance whereof, the appellant lowered its offer to Rs.149/- per cubic meter, out of which US$ 4.60 was to be the foreign exchange component. 2.1 The respondent having felt the need of Helium gas urgently, pending execution of the contract, placed an order for ad hoc supply of 52000 cubic meters of Helium gas with the appellant. The respondent again placed an order for supply of 300000 cubic meters of Helium gas on 25.5.1990. 2.2 The Ministry of Petroleum and Natural Gas, government of India, vide its letter dated 21.5.1990 released foreign exchange for procurement of Helium gas, by reason of letter addressed to the respondent stating : "I am directed to refer to your letter no.DIH/ BOP/OBG/ OS/30/90 dated 19.4.90 on the above subject and to convey the approval of the President to the procurement of 3,00,000 M3 of Helium Gas from M/s Pure Helium India Ltd., Bombay at a cost of Rs.4.47 crores including a foreign exchange component of Rs.2.38 crores (US $ 1.380 million @ US$ 5.7875 = Rs.100/-)." 2.3 The respondent thereafter issued two supply orders on 12.6.1990 to the appellant for supply of 52000 cubic meters and 300000 cubic meters Helium gas respectively at a price of Rs.149 per cubic meter inclusive of foreign exchange component of US$ 4.60. Having regard to the increase in price of the US dollar, the appellant herein claimed the difference of price of US dollar as on the date of the contract and the date of supply. The claim of the appellant was recommended by the secretary, Petroleum and Natural Gas Department as well as by certain other senior officers. The respondent, however, rejected the claim on or about 14.7.1992 whereafter the arbitration agreement was invoked. The arbitrators entered into a reference on 1.3.1993. A non-speaking award was made by the arbitrators on 13.8.1993 holding that the respondent was liable to compensate the appellant for exchange rate fluctuation in the sum of Rs. 1,03,41,309/- with interest at the rate of 18% per annum from the date of the invoices till the date of the award. The respondent herein questioned the validity of the said award by filing a petition under section 30 of the Act before the Bombay High Court which was marked as arbitration petition no.52 of 1994. A learned single judge of the High Court of judicature at Bombay dismissed the said petition and directed the award to be made a rule of the Court by an order dated 13.10.1995. 2.4 Aggrieved by and dissatisfied therewith the respondent preferred an appeal thereagainst which by reason of the impugned judgment has been allowed. The appellant is, thus, in appeal before us. SUBMISSIONS : . Mr. Dipankar P. Gupta, learned senior counsel appearing on behalf of the appellant, would contend that the Division Bench of the High Court committed a manifest error insofar as it proceeded to determine the dispute on the premise that the claim could not have been preferred under any clause of the contract. The learned counsel would contend that the arbitrators had, having regard to the scope and purport of the arbitration agreement entered into by and between the parties were entitled to go into the question of the construction of contract and they, thus, having the requisite jurisdiction therefor, the High Court could not have independently construe the same. 3.1 Drawing our attention to various clauses of the contract as also the claim petition, the learned counsel would contend that the arbitrator had analysed the terms and conditions of the contract having regard to the facts and circumstances of this case as also keeping in view the pleadings of the parties and in that view of the matter the High Court while exercising its jurisdiction under section 30 of the Act could not have interfered therewith particularly as the award was a non-speaking one. It was urged that such a claim was also maintainable having regard to a circular letter dated 25.9.1989 issued by the government of India. 3.2 Mr. Gupta would submit that the approach of the respondent in denying the just claim of the appellant must be held to be arbitrary and unfair insofar as payments on similar terms as claimed by the appellant had been made not only to the foreign bidders but in fact had been made to the other Indian bidders where the price was payable in the Indian currency. By preferring such a claim, the learned counsel would urge, the appellant had not asked for any escalation in the price but merely claimed damages in terms of the provisions of the contract occasioned by fluctuation in the rate of dollar in terms of the notification issued by the Reserve Bank of India under section 40 of the Reserve Bank of India Act and such revision was permissible also in terms of clause 23 of the contract. 3.3 In support of the said contentions, Mr. Gupta strongly relied upon W.B. State Warehousing Corporation and Another v. Sushil Kumar Kayan and Others, K.R. Raveendranathan v. State of Kerala, P.V. Subba Naidu and Others v. Government of A.P. and Others, H.P. State Electricity Board v. R.J. Shah and Company , Shyama Charan Agarwala and Sons etc. v. Union of India etc. 3.4 The learned counsel would further argue that for the purpose of interpretation of a contract not only the terms thereof but also the conduct of the parties and surrounding circumstances are relevant. Reliance has been placed on Khardah Company Ltd. v. Raymon and Co. (India) Private Ltd. In any event, the learned counsel would contend that the respondent was bound by the policy decision of the Central government in the matter of payment of difference in the rupee value owing to fluctuation in the rate of US dollar. 3.5 Mr. Mukul Rohtagi, learned additional solicitor general, on the other hand, would submit that the bid price for supply of Helium gas made by the appellant herein in terms of the contract being firm, the appellant was not entitled to any escalation in the price and, thus, in the event, the contention of the appellant is accepted, the same would run counter to the clause in the contract prohibiting escalation in the price of the goods. 3.6 Mr. Rohtagi would contend that disclosure of the foreign exchange component in the price to be paid in Indian currency was sought for only for the purpose of evaluation of bids. He would urge that for all intent and purport, the foreign exchange component had nothing to do with the payment of the price for supply of Helium gas to the appellant. In support of his contention, Mr. Rohtagi relied upon Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Another 3.7 The learned counsel would further argue that the notifications issued by the Reserve Bank of India do not constitute 'any change in law' in terms of the provision of section 40 of the Reserve Bank of India Act or otherwise. RELEVANT CLAUSES IN THE CONTRACT : . "1.16 Prices : 1.16.1 In cases where payments are required in Indian Rupees, the bidder should clearly indicate if it shall need any foreign exchange for completing the supplies/services that may be ordered on him. For this purpose they should quote the total price along with its breakdown between Indian Currency portion and the foreign currency indicating the specific currency. The bidder shall also indicate the nature of payments which it intends to cover foreign exchange payments, viz., whether it. is towards acquisition/hiring of equipment/ services, payments of personnel or acquisition of sub-assemblies, spare parts or purchase of raw materials or for any other purpose. A bidder who would not need any foreign exchange for completion of the order should state this categorically. In case the bidder would require any assistance/certification from ONGC to help him secure the required foreign exchanges it should be so stated." "1.16.3 Price preference for supplies : Domestic manufactures are entitled to get price preference over the foreign supplier. The price preference is admissible over the CIF price of the lowest technically acceptable foreign offer received in international competition. The criteria for giving price preference is domestic value added to an indigenous offer will be as follows : CIF price of lowest Direct import requirement of acceptable foreign raw material components and Tender consumable of Indian bidder Domestic value =-------------------------------- GIF price of lower acceptable foreign tender The price preference admissible to indigenous manufacturer will be as under: JUDGEMENT_596_JTSUPP2_2003Html1.htm 2.6 Bidder shall quote a firm price and they shall be bound to keep this price firm without any escalation for any ground whatsoever until they compete the work against this tender or any extension thereof. 2.7 The prices shall be given in the currency of the country of the bidder. If the bidder expects to incur a portion of this expenditure in currencies other than those stated in his bid, and so indicates in his bid payment of the corresponding portion of the prices as so expended will be made in these other currencies. 6.2 In case the price quoted by two or more domestic bidders are within the price preference limits and only Indian bidders remain in contention for award of contract, then the foreign exchange component of their bid would be loaded by a factor of 25% for the purpose of relative compensation of such domestic bids. Domestic bidders are required to quote the prices in the price schedule and indicate the import content in their offer. If there is no import content in the offer then it should be specifically stated as NIL". "12. (i) Commission shall pay for Helium at the rate of Rs.149 per M3 all inclusive for offshore supply as indicated in Annexure II. (ii) The invoice with the following support documents, should be submitted in triplicate immediately after receipt of material by Commission to DGM (FandA) 712 B, Vasudhara Bhavan, Bandra (E), Bombay - 400 051. a) The quantity of gas received duly certified by Commission's representative. b) The computer analysis of the gas chromatograph showing the purity of the gas." "21. Arbitration If any dispute, difference or question shall at any time arise between the parties herein or their respective representative or assignees in respect of these present or concerning anything, hereto contained or arising out of these present or as to the rights liabilities or duties of the said parties hereunder which cannot be mutually resolved by the parties, the same shall be referred to arbitration, the proceedings of which shall be held at Bombay, India within thirty (30) days of the receipt of the notice of intention of appointing arbitrators. Each party shall appoint an arbitrator of its own choice and inform the other party. Before entering upon the arbitration, the two arbitrators shall appoint the Umpires. In case either of the parties fail to appoint its arbitrator within thirty (30) days from the date of receipt of a notice from the other party in this behalf or the two arbitrator fail to appoint the Umpire, the Chief Justice of the Supreme Court of India shall appoint the arbitrator and/ or the Umpire as the case may be. The decision of the arbitration and in the event of the arbitrators failing to regain an agreed decision then the decision of Umpire shall be final and binding on the parties hereto. The arbitration proceedings shall be held in accordance with the or provisions of Indian ARBITRATION AND CONCILIATION ACT, 1940 and the rules made thereunder as amended from time to time. The arbitration or the Umpire as the case may be shall decide by whom and what proportions the arbitrators or Umpire fee as well as costs incurred in arbitration shall be borne. The arbitrator or the Umpire may with the consent of the parties enlarge the time, from time to time to make and publish their or his award. Arbitration will be conducted in English language and either party may be represented by persons not admitted to practice law in India." "23. In the event of any change or amendment of any Act or law including Indian Income Tax Acts, rules or regulations of government of India or public body or any change in the interpretation or enforcement of any said Act or law, rules or regulations by Indian government or public body which becomes effective after the date as advised by the Commission for submission of final price bid for this contract and which results in increased cost of works under the contract, through increased cost by the Commission subject to production of documentary proof to the satisfaction of the Commission to the extent which is directly attributable to such change or amendment as mentioned above. Similarly, if any change or amendment of any Act or law including Indian Income Tax Acts, rules or regulation of any government or public body or any change in the interpretation or enforcement of any said Act or law, rules or regulations by Indian government or public body becomes effective after the date as advised by the Commission for submissions of final price bid for this contract and which results in any decrees in the cost of the project through reduced liability of taxes, (other than personnel taxes) duties, the contractor shall pass on the benefits of such reduced costs, taxes or duties to the Commission. Notwithstanding the above-mentioned provisions, Company shall not bear any liability in respect of: i) Personnel taxes, customs, duty and corporate tax". RELEVANT PARAGRAPHS OF STATEMENT OF CLAIM OF THE APPELLANT :
(3.) . In its statement of claim, the appellant, inter alia, contended : "...The claimant has reason to believe that the Bombay regional office of the respondent had recommended that the respondent be made such payments as they rightly believed that such payments were legitimately due to the claimant under the terms of contract. That apart from the reason that the said amounts were due to the claimant under the contract terms itself, the same is also supported by virtue of a notification of the government of India setting out internal guidelines as contained in notification no.D-19011/ 7/87-ONG-UA(EO) dated 25 of September 1989 issued by the Ministry of Petroleum and Natural Gas. A copy of this notification is placed at Document no.27 and its relevant contents are reproduced hereinbelow :- "It has now been decided that..the Indian bidder's foreign exchange component may be allowed to be quoted in foreign currency for purposes of actual payment and the actual payment made in rupee equivalent to the foreign exchange component as per the BC selling rates on the date of actual payment for the imported supplies." Subsequently, the respondent issued a circular no.74/89 dated 8 November, 1989 in compliance of the abovesaid ministerial notification, a copy of which is in documents. This Circular was to be implemented in all regions and be applicable to all contracts." . The appellant in the said statement of claim, inter alia, made the following submissions before the arbitrator: " 2. It is submitted that the foreign exchange rate fluctuations did not and cannot result into a price variation/increase. It is submitted that the firm price relative to this contract was a composite price stated in Rupees and Dollars and it was that which was and has been held firm, by the claimant. The claimant is not seeking additional benefit or profit but is merely seeking to recover a specified contract consideration. 3. That the ministry notification dated 25.09.1989 has the force of law and the respondent is not entitled to act in violation of the same. 5. That it is further submitted that this very respondent has in other supplies entered into prior to the conclusion of this contract applied this notification in the manner in which it ought to have been applied and has given due benefit to various other suppliers. It is also significant that the respondent has had no hesitation in applying the said notification to the claimant's benefit in a subsequent contract. 6. That without prejudice to what is stated above, it is further submitted that the contract between the claimant and respondent was concluded subsequent to the issuance of the notification and, therefore, any endeavour on the part of the respondent to construe the effective date of the notification as sub-sequent thereto is misconceived and factually incorrect. 7. It is submitted that exchange rate fluctuations brought into effect in exercise of powers conferred on the Reserve Bank of India under section 40 of the Reserve Bank of India Act 1934 and upon directions given by the government of India has the complete force of law. That being the position any change arising therefrom is clearly covered under clause 23 of the Tender Document. Being so, the respondent is bound under the contract to compensate the claimant as to such increased costs arising out of such exchange rate fluctuations. It is further submitted that refusal on the part of the respondent to compensate the claimant without disclosing any reasons itself is arbitrary. 8. ...Any interpretation of the contract wherein foreign suppliers would be paid in foreign currency at the current rate while Indian suppliers would be paid at the rate of exchange prevailing on the date of the submission of the price bid would discriminate against the Indian suppliers in as much as any increase in the value of the dollar against the Indian rupee would destroy the costing of the Indian suppliers. The claimant states that this interpretation of the contract is discriminatory against the Indian suppliers, violative of public policy and against stated government guidelines, objectives and intentions." ISSUES BEFORE THE ARBITRATORS :;